utilities). If the rental equivalence value is not added to homeowners' consumption, then people who own their homes outright or who have housing costs below the rental value of their homes would appear to consume less than renters or homeowners with higher costs.37

The same logic applies to resource estimates that are based on an income definition, namely, that people with low or no mortgage payments or other homeownership costs should have a rental equivalence value added to their income to recognize the fact that they do not face the same housing costs as renters or other homeowners. The concept of imputed rent is hardly intuitive or palatable to many people, yet, theoretically, the case is unarguable: owners with low housing costs have more of their income available for consumption of other items (e.g., food) and, hence, not to include imputed rent is to underestimate their income relative to their poverty threshold. The imputed rent value would be net of mortgage and other costs that do not exceed the amount of imputed rent: that is, we do not suggest that homeowners who assume mortgage payments that exceed the rental value of their home obtain a deduction from income. An alternative would be to develop separate thresholds for owners with low or no housing costs and other owners and renters.

Data from the 1991 American Housing Survey indicate that 39 percent of low-income households own their homes, compared with 68 percent of other households.38 Among low-income households headed by someone aged 65 or older, 61 percent own their homes, compared with 81 percent of other households headed by someone aged 65 or older (Grall, 1994: Tables 4,5). The question is what proportion of low-income homeowners would likely have significant amounts of imputed net rent added to their income. A high proportion of low-income homeowners—66 percent—do not have a mortgage. However, a large proportion of low-income homeowners who do not have mortgages (62%) nonetheless have housing costs (for property taxes, insurance, and utilities) that are 30 percent or more of their income (34% have housing costs that are 50% or more of their income). An even higher proportion of low-income homeowners who have a mortgage (89%) have housing costs that are 30 percent or more of their income (65% have housing costs that are 50% or more of their income) (Grall, 1994: Tables 5,11,12). Overall, perhaps one-fourth of low-income homeowners could have significant

37

Similarly, consumption-based resource estimates typically include the estimated service flows from automobiles and consumer durables (and, correspondingly, exclude actual expenditures on these items).

38

The AHS "low-income" measure is not the same as the current poverty measure: it uses the official poverty thresholds, but it defines the unit of analysis as the whole household, not the family, and it measures income for the 12 months preceding the interview, which is not necessarily a calendar year. There are other differences as well (see Bureau of the Census, 1991).